VIRGINIA CITY — Comstock Mining Inc. announced April 9 that Tonogold Resources Inc. successfully completed the first phase of an option agreement signed last fall.
“This venture has diligently focused on developing a sustainably profitable mine,” said Corrado De Gasperis, Comstock executive chairman and CEO. “We feel the full potential of Lucerne depends on this type of technical collaboration, with the right partner and capital to enable it. Ultimately, Tonogold plans to invest over $20 million for 51 percent of the Lucerne Mine. Their methodical, technically diligent and credible advancement through the first phase, meeting all commitments and milestones, speaks for itself.”
Tonogold invested approximately $1 million during the past six months toward the evaluation and assessment of the Lucerne Mine Project’s resource and preliminary economic feasibility. Tonogold also paid Comstock an additional $2 million for the right to extend the option. The option agreement established a series of requirements, including technical and financial analysis, along with additional funding milestones for Tonogold to earn a share of the company’s Lucerne Mine Project.
The first milestone granted Tonogold six months to conduct an initial review of the project. During this period, Tonogold invested approximately $1 million in project costs, including a due-diligence assessment of the Lucerne resource. Tonogold commissioned Mine Development Associates of Reno to independently assess and begin modelling a portion of the Lucerne resource area. This work is in preparation for the intermediate objective of an NI 43-101 resource report and then toward a feasibility study.
To maintain and progress the option to earn-in, Tonogold will now continue investing toward a cumulative $7 million for Lucerne by Oct. 3, 2019, and a cumulative $20 million by April 3, 2021, and must produce a technical and economic feasibility assessment for mining the Lucerne resource. Under the agreement, when Tonogold completes the $20 million investment, and other related prerequisites, Tonogold and Comstock would then affect a joint venture for the future mining of the Lucerne mineral resource. In addition to the $2.2 million Comstock already received from Tonogold, the investments also include at least $1.2 million in annual subsidies for the company.
“We are pleased with the geological analysis and advancement, to date, on the Lucerne resource and the diligence of our mining partner and their advisors,” De Gasperis said. “The next phase should accelerate the evaluation, drilling and development activities, while continuing to lower our annual costs by approximately one-third.”
Comstock’s debenture obligation requires that the company use 70 percent of these proceeds for debt reduction. The company reduced long-term debt by a total of $1.6 million in April, lowering the debenture principal balance to $7.9 million. The company also had cash and cash equivalents of $2 million at March 31, excluding any additional net proceeds received from the option payment that was not used to pay down debt.